Apartment approvals ‘jeopardise’ returns in Melbourne

There are growing fears that apartment prices in Melbourne’s central business district could tumble amid a rise in off-the-plan sales and project approvals.

Victorian Planning Minister
Matthew Guy
has approved more than 17,000 apartments in 30 projects within the City of Melbourne since taking office in 2010.

The Australia 108 project in Southbank is the latest tower to win approval and will add 646 apartments to the market. The $600 million development will be 388 metres tall and will include a 288-room, six-star hotel at the top.

When Melbourne’s property market spiked in 2010, so too did off-the-plan apartment sales. The bulk of units are expected to be settled this year and next.

Property pundits warn that the latest string of high-density approvals will push the city into oversupply and that lack of demand will reduce apartment values and rental returns.

Other projects approved in recent months include Tower Melbourne, a $170 million project with 555 apartments over 71 storeys; the Brady Group’s 72-level, 524-unit project on Elizabeth Street; and the 71-storey Falls Tower on Southbank.

ISPT was also granted approval in January for more than 2000 apartments on the site of the former Age building on Spencer Street.

Questioned about the potential for apartment oversupply, Mr Guy said the government was approving developments in appropriate locations for development and that the construction activity generated by project approvals would stimulate the economy.

A strategic plan was lacking and Mr Guy was changing Melbourne’s skyline without any accountability, Mr Tee said. This would worsen congestion, put more pressure on infrastructure and decrease inner-city values.

The state government made an election promise to focus density in designated areas, such as Southbank and Docklands, and to reduce higher densities in quieter suburbs.

Mr Guy said that each apartment built in the city represented one less being built in a quiet suburban street.

“Melbourne is ready to support population growth with high-density living in appropriate locations – including the Fishermans Bend Urban Renewal Area [the largest urban renewal zone in Australia] on the doorstep of the central city," the Planning Minister said.

Informal marketing has begun for Australia 108, with more than 150 expressions of interest received. Prices will range from $425,000 for a one-bedroom unit to $775,000 for a three-bedroom apartment.

Mr Guy said the project would create about 300 construction and hospitality jobs and that when finished, it would become as iconic as Flinders Street Station or Federation Square.